Re-Forming an International Monetary System
• For most of world history there has been an international monetary system to which countries could belong...
• That broke down in 1971.

The Dollar
• The Dollar took over from Gold as the principal international money in the inter-war and post-war periods.
• The Bretton Woods System of fixed exchange rates tied to the convertible dollar broke down in 1971.
• Since then the dollar as continued as the closest thing to a world currency there is, but less so as time passed.

Dollar Less Effective Because of the Rise of the Euro
• Already in the late 1970s with the formation of the EMS in Europe a competing currency area was forming around the DM.
• The creation of the euro in 1999 confirmed that split.
• The Dollar no longer represents the mainstream of the world economy.

Split in the Mainstream
• The IMS is less effective now because there are two world currencies, the dollar and the euro.
• It would not be so bad if the exchange rates were fixed or fluctuating within small margins, but the dollar-euro market gyrates like a casino.
• Poor management by the Fed, ECB and the IMF!

...Effect on Asia
• If reform cannot be achieved, Asia should go ahead, as Europe did, with forming its own Asian Monetary System.

...The SDR
• The SDR was a good idea when it was created as a value of gold, but it has become not much more than a toy since 1974.
• As long as the dollar-euro rate fluctuates wildly, there can be no international monetary system.
• Basic reform would have to stabilize the Dollar-Euro Rate
& more...